Question
Finance: Options A decrease in ____ will decrease the price of both a call and a put on the same stock A. Dividends B. Stock
Finance: Options
A decrease in ____ will decrease the price of both a call and a put on the same stock
A. | Dividends |
B. | Stock price |
C. | Exercise price |
D. | Volatility |
The minimum option value
A. | speculative value |
B. | option price |
C. | intrinsic value |
A put has an exercise price of $12 and 9 months to maturity. The stock price is $10. Find the intrinsic value. If the option price is $2.75, what is the speculative value?
A. | Intrinsic = 2; speculative = .75 |
B. | Intrinsic = 0; speculative = .75 |
C. | Intrinsic = 2; speculative = 2.75 |
D. | Intrinsic = 0; speculative = 2.75 |
There are two calls on the same stock. Both expire in 6 months and are identical in every way except the exercise price. If Call A has an exercise price of $40 and Call B has an exercise price of $50, which call will have a higher price?
A. | Call A |
B. | Call B |
C. | Cannot be determined |
Suppose you have written both a put and a call on the same stock with the same exercise price and the same expiration date (so you are short both options). You are best off if the stock price on the expiration date is
A. | Equal to the exercise price |
B. | Below the exercise price |
C. | Above the exercise price |
Which of the following is an example of a real option?
A. | Foothold in an expanding market |
B. | End a project early |
C. | Wait for better market conditions |
D. | All of these are real options |
If the present value of the exercise price is $20, the call option is selling for $5, and the market price of the stock is $22. If the put is selling for $5, should you buy it? Why or why not?
A. | Yes, you will make $2 |
B. | No, you will lose $3 |
C. | Yes, you will make $3 |
D. | No, you will lose $2 |
You buy 35 call contracts with an exercise price of $80. The current price of the stock is $81. The ask price is $2.41 per contract. What is the cost of the option?
___________________
The call option price is always less than the stock price
True False
As the exercise price increases, the value of the put drops (All else held constant.).
True
False
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